July 21, 2011 (Chris Moore)
Two days ago we cheered the good news sparked by the strong showing in housing starts and yesterday it was anything from crickets to gasps when the National Association of Realtors (NAR) released its June Existing Home Sales report.
Expecting modest gains in home sales following May’s Pending Home Sales report, a larger than expected drop in condominium sales and a sudden spike in cancellations, resulted in a decline in existing home sales for the third month in a row. The Pending Home Sales report is an indicator of housing activity 30 to 60 days down the road, so there may still be better news in the months ahead.
Sales of existing homes fell 0.8 percent from May to June, to an annual rate of 4.77 million units, the lowest since November of last year and well below economist’s expectations of a 4.90 million unit pace. The sales rate was 8.8 percent below the 5.23 million unit rate in June of last year.
Most of the decrease was attributed to condominium sales which declined 7 percent to a seasonally adjusted rate of 530,000 units, down from 570,000 units in May.
Single-family homes sales were unchanged from May at a seasonally adjusted rate of 4.24 million units in June.
Purchase cancellations spiked from 4 percent in May to 16 percent in June. Representatives from NAR cited tight lending standards, low appraisals, and the looming lower loan limits as reasons for the elevated level of cancellations. Economic uncertainty and the uncertainty over the future direction of the housing market have also caused home buyers to re-think their home purchases.
Lawrence Yun, NAR chief economist, stated, “Home sales had been trending up without a tax stimulus, but a variety of issues are weighing on the market including an unusual spike in contract cancellations in the past month. The underlying reason for elevated cancellations is unclear, but with problems including tight credit and low appraisals, 16 percent of NAR members report a sales contract was cancelled in June, up from 4 percent in May, which stands out in contrast with the pattern over the past year.”
Meanwhile, NAR President Ron Phipps added, “Some lenders are placing lower loan limits on current contracts in anticipation they may not close before the end of September. As a result, some contracts may be getting cancelled because certain buyers are unwilling or unable to obtain a more costly jumbo mortgage.”
The national median existing home price for all housing types was $184,300 in June, an increase of 0.8 percent from June of last year.
Distressed properties accounted for 30 percent of all sales in June, down from 31 percent in May, and down from 32 percent in June of 2010.
Repeat buyers made up the lion’s share of purchasers in June accounting for 50 percent of all purchases, up from 45 percent in May, while first-time home buyer’s percentage of purchases dropped by the same amount, accounting for 31 percent of the purchases, down from 36 percent in May. Investors accounted for the rest of the sales with 19 percent of the purchases made in June.
Regionally, existing home sales in the Northeast fell 5.2 percent to an annual pace of 730,000 in June and are 17.0 percent below June 2010, while existing home sales in the Midwest rose 1.0 percent in June to a pace of 1.04 million, but are 14.0 percent below a year ago.
In the South, existing home sales increased 0.5 percent to an annual level of 1.86 million in June but are 5.6 percent below June 2010, and in the West, existing home sales declined 1.7 percent to an annual pace of 1.14 million in June and are 2.6 percent below a year ago.
The median price in the Northeast was $261,000, up 3.1 percent from a year ago, while the median price in the Midwest was $147,700, down 5.3 percent from June 2010.
The median price in the South was $159,100, down 0.1 percent from a year ago and in the West the median price was $240,400, up 9.5 percent from June 2010.
Tags: NAR, existing home sales, affordable conditions, low mortgage rates, declining prices, low appraisals, cancelled contracts, median home price